Ethereum can look forward to this ‘stress test’ as Shanghai looms ahead

• Galaxy Digital’s Christine Kim discussed Ethereum’s Shanghai upgrade on an episode of Unchained
• Kim believes unlocking of staked Ether, subsequent withdrawals will stress test the network

Christine Kim, the Vice President of Research at Galaxy Digital, recently appeared on a podcast hosted by Laura Shin. Kim, who is an experienced Ethereum researcher, shared her thoughts on the highly anticipated Shanghai upgrade and its impact on the network and ETH’s price. 

Shanghai upgrade will stress test the network

Ethereum validators have eagerly anticipated the Shanghai upgrade for a while. EIP 4895 is arguably the most-awaited aspect of the upgrade, which will unlock staked Ether and allow its withdrawals. Speaking about the upgrade, Christine Kim noted that the activation of staked ETH withdrawals on Ethereum is a major milestone. According to her, Shanghai and Capella aren’t necessarily different upgrades since they both work towards the same goal of enabling withdrawals of staked ETH. 

As for the subsequent Capella upgrade, Kim claimed that Capella illustrates the changes that will come to the beacon chain, the consensus layer of Ethereum, while Shanghai illustrates the changes that will come to the execution layer of Ethereum.

“When you withdraw your stake, your stake is coming out of the beacon chain, but it’s being moved to an address where you can interact with (it) on the execution layer of Ethereum.”

When asked about the impact of the withdrawals of staked Ether on the network, Kim acknowledged that it is a matter of concern, given that there are more than 17.5 million staked ETH at the moment. She agreed that mass withdrawal of staked Ether will stress test the limitations of the network. She also added that withdrawals will impact the incentives, with the network increasing rewards in order to attract validators.

Liquid staking platforms post Shanghai upgrade

Given Ethereum’s shift from proof-of-work to proof-of-stake, liquid staking platforms have become much more relevant for the network. Christine Kim revealed that Lido finance, the largest liquid staking provider which controls more than a third of the total staked Ether, is currently working towards becoming more decentralized. According to her, this initiative is really important for the health of Ethereum over time. 

Rocketpool is gearing up for an upgrade where instead of validator node operators being required to post 16 ETH, the requirement is being slashed by half to 8 ETH. The liquid staking provider is also exploring other upgrades where the staking requirement can be reduced further for institutional staking providers.

As for Ethereum’s roadmap, the full focus is on increasing scalability and changing its data structure. In fact, according to the analyst, the roadmap is “very ambitious.”